It is very possible for anyone to scale financial mountains but fail at the simplest of tasks. Take saving for example. It can be very easy to make good savings over time and step into financial freedom. However, if you are not careful enough to plan with foresight, you can make grave mistakes enough to derail your saving plan and plunge you into debt. In the course of my financial journey out of debt and in my interaction with others, I have learnt many lessons about saving. Here are the 6 biggest saving mistakes that you should avoid.
1. Cutting Expenditure on the Essentials
What I consider to be the biggest mistake that many people make is to stop spending on the essentials. Granted, there is no other way to start saving than to reduce expenditure. However, what many people do not do is to take some time to reflect on what is important and what is not.
It is perfectly fine to reduce your budget on non-essential items such as entertainment and alcohol. Nonetheless, taking a similar approach on necessities like health and preventive maintenance and repair works in your home can be counterproductive. Take, for instance, not fixing a leaky roof to save a few bucks. Over time, it will cost you more to repair your damaged ceilings and replace your frames and sheathing than you could have used in preventive measures.
2. Waiting Too Long to Start
If you are waiting for the perfect time to start saving, it may never arrive and you will be lucky to ever start saving before it is too late. One reason that people give for not starting early is that they hardly earn enough to save. If that is the case, start with the little you have and instill the discipline early. Another misconception of saving is that you will have to deny yourself in order to save. Not necessarily. You may have to cut on only a few expenditures to start saving.
3. Buying Cheap at The Expense of Value
Buying cheap is expensive in the long haul. This is one fact that virtually every person recognizes but many still fall prey to it. It can sometimes work but in the vast majority of cases, cheap stuff doesn’t last. If you are saving, it can be very tempting to buy on the cheap but it is one blunder you cannot afford to make. Why buy cheap to save money that will not be enough to replace the same thing a couple of months down the line when you could get a better one to last years for a little more?
4. Saving in One Account
In one of my interview with fellow financial bloggers, they identified putting their savings in one account as one of their top 5 money mistakes that they made earlier in life. This is a very common mistake that can jeopardize your plans. You may end up using funds meant for emergency for less important expenditures.
Do not lump all your money in one savings account unless you have only one financial goal, which is hardly the case. Prioritize an emergency funds account, have an account for paying your bills and then create an account for each of your financial goals.
5. Underestimating the Power of Pennies
When we are dealing with large sums, it is easy to underestimate the impact that meager pennies can have in our saving plans. More often than not, we are quick to get rid of them by buying things we do not need. Anyway, who needs them? In sharp contrast, many people who keep them have been very surprised to learn how much they have saved through them. If you would like to realize their full potential, start using paper money and keep all your coins in a jar.
6. Underestimating the Task at Hand
Starting to save is like going to the gym. You will have to be committed in order to see results. Much like all radical changes, the first few months will be difficult as you learn to live without some things or luxuries that you once cherished. It can very easy to give up as the changes begin to sink in. The challenge is to keep at it knowing that the long term benefits far outweigh the present inconveniences.
In summary, history has very many good lessons to teach us if we are willing to listen. One thing it affords us is an opportunity to learn from the mistakes of those who have gone before us and adapt accordingly. Saving is only easy to those who take time to plan, learn from the mistakes of others, and remain focused on the end goal in the face of unending inconveniences.